The Bank of England is considering imposing strict limits on the holding of stablecoins (10,000 to 20,000 £ for individuals, 10 million for businesses), sparking a backlash in the crypto ecosystem.
While the United States (Genius Act) and the European Union (MiCA) are moving forward with clear frameworks, London risks losing its status as a financial hub to more pragmatic competitors.
The BoE justifies these limits out of fear of a massive outflow of bank deposits, but industry players denounce it as a technically unworkable and dangerous measure for British innovation.
A Tough Stance Isolating London
These limits would only target so-called ‘systemic’ stablecoins, those widely used for payments in the UK. However, implementing them presents a technical headache: stablecoin issuers do not know who holds their tokens. Imposing caps would require a costly system for permanent surveillance of wallets or digital IDs.
For Simon Jennings of the UK Cryptoasset Business Council, ‘the limits do not work in practice.’ Beyond technical complexity, the UK would mainly risk cutting itself off from a booming market.
Europe and the U.S. Leading the Way
While London hesitates, Washington has already passed the Genius Act last July. This legislation provided a clear framework for stablecoins, strengthening their role in the American financial system. As a result, the global market has climbed to $288 billion and could surpass $1,200 billion by 2028, according to Coinbase.
In Europe, the MiCA regulation also offers a more predictable environment for issuers and investors. The City, long a global hub for financial innovation, is seeing its lead erode against more pragmatic competitors.
Risks Highlighted by the BoE
The Bank of England sees a clear threat: ‘if too many savers move their money to stablecoins, banks risk a sharp drop in deposits and therefore their ability to lend.’ In a recent speech, Sasha Mills, director of market infrastructure supervision, emphasized the danger of ‘massive and rapid withdrawals’ that could weaken the real economy.
The institution, however, clarifies that these limits could only be ‘transitional’, ‘until the financial system adapts to the rise of digital currency,’ an explanation that still lacks clarity. A public consultation is expected by the end of the year.
The UK at a Strategic Crossroads
Rachel Reeves, the new Chancellor of the Exchequer, promised this summer to ‘support innovation in financial services,’ particularly through blockchain and stablecoins. But the repeated interventions of Governor Andrew Bailey, who opposes overly rapid regulation, heighten tensions with the Treasury.
Meanwhile, academic voices like Gilles Chemla (Imperial College) warn: ‘Stablecoins are no longer experimental. They are becoming the foundation of the global digital economy.’ For him, delaying the regulatory framework risks London losing the opportunity to stay ahead.
In essence, the Bank of England is playing a risky card: ‘protecting the traditional banking system,’ but at the expense of a possible lag for the City in the global race for stablecoins.
